Charles Lane: The US needs to get serious about its defense spending

Charles Lane

In the run-up to this week's North Atlantic Treaty Organization summit, much has been made of the fact that the United States is one of just a handful of the 28 member states that spends more than 2 percent of its gross domestic product on defense along with Britain, Estonia and Greece, and the latter qualifies only because its GDP has collapsed even faster than its military budget.

Undoubtedly the Europeans must shoulder their fair share of the defense burden if they are simultaneously to resist Vladimir Putin's new aggressiveness and to persuade the United States, which currently spends $3 on defense for every $1 its NATO allies spend, to continue supporting them.

Yet the events in Ukraine and in northern Iraq, where the Islamic State is slaughtering its way to a "caliphate," should force a realistic assessment of the United States' own defense budgets, which are not actually as robust as the Pentagon's share of GDP 3.8 percent, according to the World Bank would imply.

Under current law, defense spending will steadily decline to 2.7 percent of GDP over the next decade, the Congressional Budget Office (CBO) estimates. Much of that is due to the winding down of the war in Afghanistan, as well as the lingering impact of sequestration.

This would represent the lowest level of funding since before World War II, and it would have to be spread among defense commitments beyond those of NATO. Unlike most of its European allies, the United States has interests and treaty obligations in Asia and elsewhere.

Fact is, the share of GDP that the United States or any other country devotes to its defense budget is at best a symbolic indicator: It contains no information about the actual use of the money.

As the United States' defense budget shrinks relative to its economy, more and more of it is destined to purposes that have little, or nothing, to do with deterring or, if necessary, winning wars in the here and now.

The CBO reported in January that the Defense Department's health-care costs will rise from $49 billion in 2014 to $70 billion in 2028 (in inflation-adjusted dollars). That is an increase of about 40 percent in real terms; as a result, health care will account for 11 percent of the defense budget in 2028, up from an already astounding 9 percent today.

The mainspring of this spending growth, the CBO found, is the increasingly generous benefits Congress has bestowed on military retirees, not the cost of taking care of active-duty service members and their families.

As the CBO put the matter, "In a fiscal climate in which the department's overall budget can increase only slowly, continued rapid growth in military health care costs could force DoD to reduce spending in other areas, such as force structure, military readiness, and weapons modernization." Less bureaucratically: Every dollar spent on health benefits for retirees is a dollar we can't spend training and equipping men and women to deal with the Islamic State, Putin and other threats.

A similar point applies to military pensions, a $51 billion item in fiscal 2014 projected to grow to $62 billion by 2024.

As a raft of commissions and experts have amply documented, retiree benefits are vastly oversold as a recruitment tool, in part because you only qualify after 20 years of service, a condition that only a minority of the military fulfill. What's more, many working-age retirees get deeply subsidized military health care even though they could qualify for insurance through their jobs; after they join Medicare, Uncle Sam buys retirees the equivalent of Medigap insurance.

Modest co-payment increases and other tweaks to the health program could save billions, but Congress dares not cross the military retiree lobby.

The Ryan-Murray budget agreement enacted at the end of 2013 did trim 1 percentage point from military pension cost-of-living increases, saving $6 billion over 10 years. Tiny as it is, the change doesn't go into effect until December 2015, and powerful retiree organizations are vowing to undo it before then.

The truth is that military retiree health care and pensions are badly in need of reform, as President Barack Obama, to his credit, has noted in repeated budget proposals to Congress. But lawmakers of both parties resist, in deference to the lobbies and to the detriment of our nation's defense capabilities.

Meanwhile, we borrow. Putin's aggression, and the rise of the Islamic State, test more than the democratic West's ability to raise and spend defense dollars; they test our ability to overcome parochial interests and set priorities. In short, to be serious.

Europe's failure, so far, to confront these new menaces effectively is often attributed to its economic malaise, which, in turn, reflects its convoluted and indecisive governance its lack of seriousness. All true. But are we so different?

(Charles Lane is an editorial page editor for The Washington Post. This commentary was distributed by Washington Post News Service with Bloomberg News.)